OR, How I thought I'd hit my head on the debt ceiling but ended up stubbing my toe on low rates.
The Treasury Dept. surprised most of us willing to tell the truth with a "delay" in the issuance of 2 year notes. The yield on current 2s slid a couple basis points on the news. That T Bills for Nov. had slipped away on spooky default apparitions went unnoticed save the few somber practitioners still charged with that segment of the curve. In a moment of Zen for timing, CS announced it would shutter its PD operations. Hey, no debt no need to be a PD !
The Treasury Dept. explained their move by a concern that the Note would not settle. I would agree with MS "govvie guru" David Greenlaw, this move smells like political pressure from the Administration via Jack Lew. For all the now regular hyperventilating over debts (too much or too few depending on who's yelling louder) , cash management and ceilings; Treasury has avoided messing with issuance.
The debt ceiling is nothing more than a Congressional tool to improve the optics that those you've sent to DC are watching the purse. The Administration, and others, have spun the sound bite that, "This is just to pay for what we've already spent." A half truth, at best. The fear of non-payment in Bills coupled with hoarding short supply in 2s -simultaneously - shows the Sybil-esque responses to the same issue.
The US "refunds" itself. The paltry yields Tea Party-ers say are "ripping off savers" reflect the risklessness of the paper. The interest is paid by the issuance of a like obligation. Quarterly, at one time, bi-monthly, monthly and weekly; the demand is only tenuously attached to supply . When deficits evaporate, or small thinkers balance the budget (or God forbid run a surplus) the running supply must decline. This does NOT constitute a shortage. Treasury messing with issues is hardly a "soft default" or a "reschedule", the latter purgatory the realm of governments with warmer climes like ARG and Greece.
If there is not enough debt in the market, then surely the Fed could off load some of its hoard without a problem. Since the Treasury Dept. gets the "profit" transfer from the Fed account, just don't pay it if you have a cash management problem. This is all circus accounting and carnival barking. The focus needs to come back to growing the economy faster. That's been done in times of big deficits AND marginal surpluses - the debt is not the problem.